Stabbed in the Back
Disclaimer: The events depicted in this scenario are fictitious. Any similarity to any corporation or person, living or dead, is merely coincidental.
Part One: Opportunity Knocks
Jack Fisk, nice and warm in the comfort of his study in Fort Collins, Colorado, sat and stared at the message in his personal email account inbox. He sat and stared at it for a long time.
Jack took a sip of herbal tea and a nibble of the lemon cookie at his elbow. Then he went back to staring at the message. There it was in black and white, an offer from a Chinese national — an offer he felt he couldn’t refuse.
As a lead engineer with Super Diamond, a manufacturer of mining and drilling equipment, Jack was an integral part of a team that developed one of the most effective drilling bits ever made. The bit, used in gold mining and deep-sea oil extraction, was helping to push Super Diamond into record-breaking revenue territory.
There was only one problem and it was a very big one, for Jack at least. Super Diamond’s top line was breaking records, but Jack Fisk felt left out. Where were his millions, he wondered.
Well here they were. He didn’t know how they found him, but they found him.
The deal was this. Hand over some of Super Diamond’s top-secret product information and receive a seven-figure reward.
As Jack considered the offer, he felt entirely justified in taking it. It was his creativity and knowledge, more than anyone else’s, which led to the product breakthrough. He was sure of it. He knew it in his gut.
Here’s what Jack didn’t know. Another employee of Super Diamond, an IT executive based in Mumbai, was looking at a very similar email. This employee, Vijay Bhakta, enjoyed super-user status within Super Diamond’s computer networks, with access to all of its servers.
The Chinese had done their homework. Jack, married with two children, lived a pretty straight life. The lure of a big paycheck was more than enough for him.
Vijay enjoyed a riskier lifestyle. Money was a good motivator for him, but just as compelling were the offers of drugs and prostitutes the Chinese were dangling in front of him.
In approaching Vijay, the Chinese were after more than product information. They wanted access to Super Diamond’s customer list and information on its entire product line, not just the drilling bits that Jack helped develop.
Both executives, unbeknownst to the other, took the bait.
For the next 18 months, Jack used the time-honored method of downloading proprietary information onto a thumb drive, walking out the door with it, and painstakingly sending it to his Chinese contact using his personal email address in the quiet comfort of his study at home.
The Bitcoin payments from the Chinese, amounting to $2.7 million in 18 months, arrive faithfully. Jack uploads his company’s precious trade secrets just as faithfully.
Vijay is introduced to a hacker who, armed with the IT exec’s user information and passcodes, invades Super Diamond’s system at will over the same time period.
Vijay is also faithfully compensated, with cash drops and services meeting his other needs, under the terms of his agreement with the Chinese.
At the end of 18 months, fully exploiting their two points of entry, the Chinese own the keys to the Super Diamond kingdom. They know how to make a number of Super Diamond’s products and they know exactly who to sell them to and at what price.
Part Two: A Chilling Recognition
Super Diamond’s risk manager, Cathleen Sunbury, is enjoying an invigorating game of tennis with a friend on a sunlit court in San Diego, when she gets an urgent text from the company’s COO.
“Please get to the office, ASAP,” says the message. “Urgent.”
A chill runs through Cathleen.
“Uh oh,” she says, as she and her friend grab a water break courtside.
“What is it?” her friend says.
“I don’t know what it is, but it doesn’t look good,” Cathleen says. “I gotta go.”
“Is this because I was winning?” her friend asks.
That would normally be a funny jibe between friends. It’s not today.
At the office, other company executives share with Cathleen what they know. Sales in several of Super Diamond’s key Asian markets have suddenly softened.
There is also an indication that the company suffered an IT breach, but the extent of it is difficult to ascertain. Whoever broke in did a great job of covering their tracks. What was accessed and what was taken appear to be unknowns. The company’s IT department is at a loss.
“I know who to call,” Sunbury says, banking on a conversation she had with a former higher-up in the FBI who now works for a cyber forensics firm in Philadelphia.
The Super Diamond CEO and CFO initially balk at the forensic firm’s price tag.
The vice president of the forensic firm, who led key cyber investigations for the FBI before entering the private sector, snorts in derision.
“Your company is horrible at this,” the forensics VP says.
“Your IT department has no idea what happened and it will take them months to figure it out,” he says.
“It’s looking like you have an internal perpetrator, possibly more than one. How much longer can you afford to wait to determine what’s going on?”
The phrase “possibly more than one” overwhelms any resistance on the part of the CFO and the CEO. They sign on the dotted line with the forensics firm.
The forensic firm gets right to work. To connect the dots they pull records from a number of departments, including Human Resources and Security.
They also have their own cyber security specialist take a look at the Super Diamond network to see who might have compromised it.
It takes the forensics firm two days to come up with two names: Jack Fisk and Vijay Bhakta.
Part Three: Gone, Gone, Gone
Jack Fisk and Vijay Bhakta are dismissed and face criminal charges. As painful as that is for company executives, that’s the easy part.
What comes next for Cathleen Sunbury in her role as risk manager is far more painstaking, and far more painful.
The forensics team is able to match up human resources records, including data on when Vijay Bhakta and Jack Fisk were in the office, against data on computer use, including when an outside device was connected to Jack Fisk’s computer.
That left no doubt that the product information and additional company information that was taken from Super Diamond was the work of inside perpetrators.
The “good” news is that Super Diamond executives now understand what happened. The bad news is that their insurance policies are inadequate to cover the loss.
Determining the value of what was taken, including the cost of lost sales, is difficult, but Super Diamond executives settle on a figure of $200 million.
The company’s cyber breach policy, though, covers an occurrence in the event of a breach from an outside hacker. Bhakta and Fisk are internal perpetrators, and thus the company is not covered, its carrier says.
Compounding the pain, Super Diamond shareholders file suit against Super Diamond executives and board members. The shareholders argue that the board and the C-suites failed to take adequate measures to protect proprietary company information.
The company’s E&O and D&O policies respond to the costs of the lawsuits. But the company faces punishing premium increases for both E&O and D&O coverage going forward.
Sales are depressed, due to the theft of key intellectual property, and getting good cyber coverage at a reasonable price is flat-out impossible.
Super Diamond settles for a premium increase to cover both external and internal hacks that is 400 percent more than it faced the previous year.
Worn out by the process of determining the loss and trying to get coverage for a company that is bleeding money; Cathleen Sunbury resigns.
“I don’t know who we’re going to get to replace you,” the CEO says.
“I don’t know either,” Sunbury says, meaning no disrespect but feeling utterly defeated.
Risk & Insurance® partnered with Swiss Re Corporate Solutions to produce this scenario. Below are Swiss Re Corporate Solutions’ recommendations on how to prevent the losses presented in the scenario. This perspective is not an editorial opinion of Risk & Insurance®.
Super Diamond’s Cathleen Sunbury might still have her job and her company would be in much better shape had she partnered with Swiss Re Corporate Solutions.
Swiss Re, in addition to offering cyber insurance coverage that would have covered an internal perpetrator incident such as the one detailed in “Stabbed in the Back,” would also advise Sunbury and her fellow executives at Super Diamond on being much better prepared to defend against and respond to it.
Having a forensics team, a crisis (breach) communications partner and the right law firm lined up ahead of time would have saved the company a lot of time and trouble. Swiss Re offers all of that as part of its coverage.
In just one example, imagine the costs that Super Diamond will incur if it has to go after Vijay Bhakta and Jack Fisk in civil court, or what it’s going to spend defending itself against shareholder lawsuits.
Swiss Re Corporate Solutions would have paid for Super Diamond’s legal defense, compensated it for lost revenue, and paid for data reconstitution and additional legal costs as part of its CyberSolutions product.
The lost sales in Asia that Super Diamond experiences when Jack Fisk sells its intellectual property to a Chinese national would also be covered under that policy.
On the front end, Swiss Re Corporate Solutions would work with Super Diamond to identify which of its mining or drilling technologies were most valuable; in other words, naming the “crown jewels” that the company absolutely could not afford to lose control of. That would also involve ascertaining where those “jewels” are stored and who has access to them.
The upfront work would also include the services of experts with IBM who can conduct penetration tests of the company’s IT systems.
In essence, companies everywhere need to understand that any gap in its preparedness or ability to respond creates liability. There is not only the initial liability of a loss or a penetration, there is the multiplying liability of shareholders, or regulators, holding the company responsible for its negligence.
By partnering with Swiss Re Corporate Solutions and picking up its CyberSolutions product, Super Diamond would have bolstered its risk mitigation and vastly improved the efficiency of its response.
No company is safe from a cyber penetration; the record is clear on that. But experts say many companies have a lot of ground to make up to become more vigilant and better coordinated to bounce back when an incident occurs.
No entity can do this on its own. Pick the right partner(s).